Correlation Between Gap and Boot Barn

Can any of the company-specific risk be diversified away by investing in both Gap and Boot Barn at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gap and Boot Barn into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gap Inc and Boot Barn Holdings, you can compare the effects of market volatilities on Gap and Boot Barn and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gap with a short position of Boot Barn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap and Boot Barn.

Diversification Opportunities for Gap and Boot Barn

0.43

Correlation Coefficient

Gap  Boot Barn

Very weak diversification

The 3 months correlation between Gap and Boot is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gap Inc and Boot Barn Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boot Barn Holdings and Gap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gap Inc are associated (or correlated) with Boot Barn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boot Barn Holdings has no effect on the direction of Gap i.e., Gap and Boot Barn go up and down completely randomly.

Pair Corralation between Gap and Boot Barn

Considering the 90-day investment horizon Gap is expected to generate 28.57 times less return on investment than Boot Barn. But when comparing it to its historical volatility, Gap Inc is 1.01 times less risky than Boot Barn. It trades about 0.0 of its potential returns per unit of risk. Boot Barn Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12,893  in Boot Barn Holdings on September 26, 2024 and sell it today you would earn a total of  1,905  from holding Boot Barn Holdings or generate 14.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	34.4%
Values	Daily Returns

Gap Inc  vs.  Boot Barn Holdings

Gap Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gap Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gap is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Gap and Boot Barn

The main advantage of trading using opposite Gap and Boot Barn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap position performs unexpectedly, Boot Barn can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Boot Barn will offset losses from the drop in Boot Barn's long position.

The idea behind Gap Inc and Boot Barn Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.